Just put it in this folder and you'll be able to select it from Settings > Background Image > imagename.png

Most common file formats are supported, less common formats may work on some java instalations.
For the image to work the width must be dividable by 64 and the height divideable by 32.
Example: 640x320 works, 320x160 works, 320x320 works as well, 96x32 works but 100x121 doesn't.

All included images are made by Patrik Swedman except "Alwayswatching.png" which is made by "Alwayswatching".
"char_unlined.png is a remake of a image made by "r4c7" (which was probably based on one made by "PuyoDead"). All of which are based of the default skin made by "Notch".
All the files with "EiE" in the name is made by The Eie.

Just don't want to forget to credit someone :P